Thursday, August 28, 2008

Oil price hike issue seems to extend its lifespan from prior to the 12th Malaysian General Election to the recently ended Permatang Pauh by-election. Here are some information on this issue – an extract of information from Reuters and a summary of arguments on Malaysian oil subsidy policy that mostly based on the Anwar Ibrahim versus Ahmad Shabery public debate.

Prices have rallied from a dip below $50 at the start of 2007 and this year have risen by around 40 percent from $95.98 a barrel at the end of last year. Adjusted for inflation, oil is well above the $101.70 peak hit in April 1980, according to the International Energy Agency, a year after the Iranian revolution. The balance of demand and supply is tight with daily demand of roughly 86 million barrels per day, almost the same level as daily supply.

The following are other major factors that have driven the oil market higher.

(1) Dollar weakness and funds

A combination of weaker performance in other asset classes and expectations of continued strength across the commodities complex has drawn in investors and speculative funds, providing further support for the market. An added incentive for them has been the weakness of the dollar against other major currencies, which makes dollar-denominated commodities relatively cheap. They are also seeking an inflation hedge, as commodities tend to rise when other asset classes fall.

(2) OPEC

The Organization of the Petroleum Exporting Countries (OPEC) has been at the forefront of those citing speculation and a weak dollar as the reason for higher prices, saying it is pumping enough oil to keep the market balanced. Saudi Arabia, the biggest OPEC producer, is expected to raise output close to 9.5 million barrels per day (bpd) in June up from around 9.1 million bpd in May. OPEC has not officially increased output since a meeting last September and has no plans to meet formally until September 9.

(3) Peak oil?

Some analysts have questioned whether OPEC is capable of raising its output significantly. The so-called pessimists have argued the world's oil supplies are at or near a peak. Optimists say there is still plenty more oil and improved technology will ensure it can be extracted from the ground, but a host of political issues has hindered production from many of the biggest reserve holders. Iraq's output has been disrupted by years of sanctions and then war. Sanctions have also limited exploration in Iran and violence has interrupted flows in Nigeria.Adding to the difficulties of getting oil out of the ground, high prices have fuelled a trend for resource nationalism, or resource-holders seeking to keep the bulk of their natural wealth for themselves. The biggest OPEC producers already prohibit foreign operators from accessing their oil reserves. Non-OPEC Russia, the world's second biggest oil exporter, has also been limiting foreign involvement in its upstream while its output has stagnated.

(4) Demand

There is mounting evidence high prices have begun to erode demand, but continued growth in China and other emerging economies is expected to offset the impact of any fall in developed countries. While high taxes reduce demand in some developed economies, subsidies spur consumption in emerging economies. In the developed world, some governments are considering reducing taxes, while emerging economies, struggling with the growing burden of subsidies, have started to lift them.

(5) Refinery Bottlenecks

Even if there is plenty of crude to meet demand that does not mean there is an adequate supply of refined products, such as diesel and gasoline, as there is a lack of refining capacity. Faced with planning battles and reluctance to invest in the downstream sector, which is not always profitable, the world's biggest energy consumer the United States has not built a new refinery for decades.

Anwar vs. Ahmad Shabery public debate

The debate entitled ‘Form the government today, reduce fuel prices tomorrow’ was organized by news portal Agenda Daily and took place at Dewan Bahasa dan Pustaka in Kuala Lumpur at 8.30pm on 15th July 2008. The contents of the debate and other off-the-stage justifications from the government as well as counter-arguments from Anwar Ibrahim are summarized as below:

Counter-arguments: Malaysia is a net oil exporter. Thus, increase in oil price should be beneficial to Malaysia. Increase in net oil revenue could be channel towards domestic fuel subsidies.

Government: Fuel (petrol) price in other foreign countries are much higher. Examples are Norway and Finland. Hence, fuel in Malaysia is under-priced.

Counter-arguments: Those countries that have higher fuel price are non oil-exporting countries. Furthermore, theirs income per capita are much higher than Malaysia.

Government: Petronas already contributed much of its profit back to government for subsidies. Government could not take all of Petronas profit as the company needs retain profit for further development.

Counter-arguments: Repayment from Petronas is enough; only the usage of its repayment is questionable. Example is channeling government revenue to infrastructures and giving tax relief incentive for the benefit of industry players is actually another form of “subsidy”, but not to the poor but to the capitalist. Unnecessary projects and corruption cause leakage to the needed fund to subsidy for fuel. Deals with IPP also seen as leakage and benefit to capitalists rather than the poor citizen.

Government: Malaysia’s oil reserve will finished in near future. Therefore, government needs to have prudent saving from current oil revenue for the benefit of the future. Otherwise, a more shocking bigger fuel hike may happen once Malaysia turn from net oil exporter to net oil importer.

Counter-arguments: Those reports about exhaustion of Malaysia oil reserve are based on assumption that no other oil field would be found in Malaysia. Thus, if more new oil field found, Malaysia would still be net oil exporter. Furthermore, Petronas is currently exploring oil field overseas instead of locally. Petronas should be encouraged to continue doing so to prolong exhaustion of oil reserve in Malaysia. Investment returns from Petronas could also be another source of funds for fuel subsidies.

Monday, August 25, 2008

The Beijing 2008 Olympic Games finally came to a conclusion, offering few thoughts to the world and also to Malaysian. China topped the standings by winning the highest number of gold medals. This shows the world that the emerging of China as a potential superpower is not merely a dream or myth. Therefore, some Western powers lead by the United States shows sign of distress by “attacking” the credibility of China. Attacks started even before the bidding for this Olympic Games. China lost in its first attempt, believing that anti-China propaganda, particularly on human rights issues, did the damage to China. During the torch run, disturbance were everyway as sentiment over the issues of Tibet been fanned up non-stop in Western media. Some Western media have been criticizing host China since the opening ceremony. Criticisms included questioning China’s ethical behaviour over the issues of Lin Miaoke’s photogenic stand-in for the real singer, Yang Peiyi, China boasting their military might in the opening ceremony, alleged fake (recorded) live fireworks display, continuous voicing out on China’s human right abuse and accusation of China’s gymnast being underage. Perhaps, a clear jealousy over China success is the medal ranking – putting the UnitedState as No. 1 by using the “total medals” as yardstick for ranking instead of ranking by number of gold medals is seen in various Western media. See Telegraph’s report that criticized US media on this issue. Anyway, all those criticisms as well as ranking method discrepancy may have their respective merits in this rhetoric-oriented world.

Source: Official Website of the Beijing 2008 Olympic Games at http://en.beijing2008.cn. [Note: Original link to respective countries medal intact for access to further information]

Compliments to host China are plenty as well. Quoting Reuters, “China basked in the glow of their 51st gold medal and got a clear thumbs-up from International Olympic Committee on the last day of the Games on Sunday…The hosts finished well clear atop the medals table with 15 more golds than the United States.” CNN reported “Grand fireworks and spectacular choreography brought to a close the Beijing Games Sunday as one of the most remarkable Olympics in recent history were declared at an end” while AFP wrote that “For China, the investment of more than 40 billion dollars on the Games reaped handsome rewards. They not only topped the gold medal count, but a near flawless organisation meant the controversies that marred the build-up largely slipped into the background.” AFP also quoted IOC President Jacques Rogge described the Games as “truly exceptional”. Rogge further elaborated that "more than 40 world records were set, more than 100 Olympic records, and of course we had the two icons of the Games, Michael Phelps and Usain Bolt" say it all for the Beijing 2008 Olympic Games.

Picture source: Official Website of the Beijing 2008 Olympic Games

Besides China, South Korea and Japan are the only Asian countries managed to be ranked among the top ten (by gold medals count). Another 16 more Asian countries managed to win at least a medal, including a silver achievement for Malaysia. But, the question is should Malaysia has won more medals? Relentlessly boasting its “dynamic” economic, why Malaysia seem so proud of merely winning a silver medal? Please do not compare with Singapore. Benchmarking towards a lower level of achievement is not a good culture for the country, indeed any country. One of the higher benchmarks that could inspire Malaysia is Jamaica. Jamaica won 6 gold medals, 3 silver medals and 2 bronze medals with Usain Bolt creating world records in men 100 meters, men 200 meters and men 4x100 meters rally. Even fellow Asians like Mongolia, Thailand and DPR Korea respectively have two gold medals.

From the opening and closing ceremony, host China gave emphasis on Chinese writing and system, including the arrangement of participating countries parade (that surprisingly seeing Australia delegations coming out at the end of the parade), the countdown and its President’s speech. If Olympic is held in Malaysia, will our national language, Bahasa Malaysia being emphasized and given priority over English? Not to dream of topping the medal standings like China, but when will Malaysia produce its first gold medallists and world record breakers? When will Malaysia have a world sport icon?

One world, one dream. Sports such as Olympic (and maybe Soccer World Cup) could bring all countries around the world to share a dream of sportsmanship. Regardless of triumph or disappointment, it would be good if the world could stop all conflicts (even for a short while) to savour the excitement of the Games peacefully. Nevertheless, dreams may be different again after the Games. When China is realizing its dream, the United States may begin to have nightmare of losing its superpower status. Meanwhile, Malaysia seems have not wake up from its sweet dream since long time ago. Hence, in four years time in London 2012 Olympic Games, whither Malaysia?

Saturday, August 16, 2008

[Background of the issue: Khalid Ibrahim, the Selangor Menteri Besar’s (MB) suggestion to reserve 10 per cent of places in Universiti Teknologi Mara (UiTM) to non-Bumiputeras and foreigners. His suggestion received heavy protest]

Har Wai Mun: The MB's reasoning for his suggestion is to allow UiTM students to gain more exposure and be friendlier to people of other races.

If anyone thinks his reason is not correct, the logical counter-point would be along the lines of either ‘the suggestion would not allow students to gain more exposure and be friendlier to other races,' or ‘allowing students to gain more exposure and be friendlier to people of other races is not beneficial'.

Hopefully, the MB's suggestion will be viewed constructively and is not obscured by communal sentiment. Non-bumis will be an asset to UiTM.

Quoting a declaration on various placards on parade at the demonstration, the MB's suggestion might not only ‘Selamatkan UiTM' (Save UiTM), but might propel UiTM to be a world-class university that makes all Malaysians very proud!

[Note: My other published articles in malaysiakini – shorten and modified from the entries in this blog is as below]